Requirements for

Medical Scheme Administrators

February 2010

REQUIREMENTS FOR ADMINISTRATION OF MEDICAL SCHEMES

Enquiries:
Ms Hannelie Cornelius
Accreditation Manager: Administrators and Managed Care
Tel: 012 431 0406
Fax: 012 431 0607
E-mail: / Enquiries:
Ms Avril Jacobs:
Senior Accreditation Analyst
Tel: 012-431 0586
Fax: 012-431 0644
E-mail:

TABLE OF CONTENTS

A.GENERAL

1.Introductory Note

2.Administration functions

3.Medical scheme data to be maintained

B.THE ACCREDITATION OF THIRD PARTY ADMINISTRATORS

1.The accreditation process

a.First-time applications and evaluations

b.Renewal applications and evaluations

2.ADMINISTRATION REQUIREMENTS

a.Third party administrators - Domicilium & compliance measurement

b.Sub-contracting of administration services by an accredited administrator

c.Third party administration agreements

C.SELF-ADMINISTERED MEDICAL SCHEMES

1.The evaluation of compliance with the administration standards process

a.First time compliance evaluations

b.Subsequent compliance evaluations

  1. GENERAL
  1. Introductory Note

Relevant provisions of the Act and Regulations –

  • Section 1(1) – definition of “administrator”
  • Self-administered schemes:

-Section 26(9)

-Section 57(4)(h)

-Regulation 16

  • Third party administrators:

-Section 58

-Chapter 6 of the Regulations

The object of accrediting third partiesinvolved in the administration of medical schemes and the evaluation of compliance with the administration standards by self-administered schemes is to promote institutional safety and soundness of medical schemes. Although it is recognised that the administration of a medical scheme may encompass much wider functions, the following general areas of administrative functions have been identified as of critical importance for which entities fulfilling these functions must be accredited (and in the case of a scheme fulfilling these functions itself, meet the accreditation requirements):

  • General compliance (Regulatory compliance i.r.o financial soundness, admin agreement, fidelity and indemnity insurance, etc.)
  • System assessment (administration system)
  • Member record management
  • Contributions management
  • Claims management
  • Financial management reporting
  • Information management and data control
  • Customer services

It must be stated that identifying these specific areas of administration functions does not in any way detract from the importance of any other functions that are required in respect of the administration of a medical scheme, nor does the accreditation of entities fulfilling these functions in terms of a contract with client schemes absolve the trustees of a scheme of their duty to properly manage and ensure the effective administration of their scheme.

  1. Administration functions

Any entity providing the following services (whether contracted out or in-house) in respect of a scheme must employ integrated systems and processes which, in terms of the Act, relevant scheme rules and all other applicable laws, adequately deal with:

a)Member record management

  1. Registration/termination of members and dependants.
  2. Maintaining /updating membership records.
  3. Issuing of membership cards and certificates of membership.
  4. 3.1.3Income tax information for members.

b)Contribution management

  1. Preparation of billing / membership schedules in line with the registered scheme rules (where applicable).
  2. Timeous collection, allocation and reconciliation of contributions (including savings where applicable) at individual member level.
  3. Robust credit control procedures to manage and collect any outstanding member debts owing to the scheme.
  4. Suspension / termination of membership as provided for in scheme rules and guidelines determined by the trustees.
  5. Maintaining debtors’ age analyses per category of debtor, e.g. member debt, provider debt and outstanding contributions.

c)Claims management

  1. Receipt, validation and payment of all claims in accordance with the scheme rules and the Act.
  2. Payment of contracted fees to providers (where applicable).
  3. Appropriate communication as prescribed in the event of claims being queried or rejected.
  4. Providing claims advice statements to members and providers.
  5. Provision of at least basic fraud detection services.
  6. Payments from medical savings accounts to be conducted in terms of the scheme rules and the Act.

d)Financial management reporting

  1. Opening and maintaining relevant bank account(s) in the name of the scheme.
  2. Depositing of scheme monies as prescribed.
  3. Effecting payment of claims and expenses in terms of delegated authority between scheme and administrator.
  4. Allocation, reconciliation and maintenance of general ledger control accounts, including but not limited to contributions, claims and savings accounts.
  5. Preparing detailed monthly management accounts, annual financial statements, statutory returns, and other reports in the required format.
  6. Verifying, effecting payment, and regular reconciliation of payments to contracted providers in terms of the scheme rules and agreements.

e)Information management and data control

  1. Comprehensive disaster recovery and business continuity plans are in place.
  2. Comprehensive data back-up and offsite storage measures are in place.
  3. The administration systems employed must be able to accommodate the complexity of scheme options administered, and have sufficient capacity to accommodate growth or a change in the scheme’s needs..
  4. All registers, minute books, records and other data pertaining to the scheme remain the property of the scheme concerned, and no lien may be held over them by the administrator.
  5. The Administrator must take such steps as may be required to maintain the confidentiality, integrity and security of data in relation to the scheme under administration.

f)Customer services

  1. Providing appropriate and adequate infrastructure, facilities and staff to manage all enquiries relating to the scheme(s) under administration in accordance with the administration and service level agreements.
  2. Records must be maintained of all enquiries made, the administrator’s response thereto and turnaround times must be recorded and monitored.
  3. The administrator must employ systems and processes to ensure that broker remuneration is calculated and paid in accordance with the Act and the agreements between the brokers and schemes concerned.
  1. Medical scheme data to be maintained

The data remains the property of the Scheme and copyright vests in the scheme. The Administrator or self-administered scheme will take all steps as may be reasonably required to protect the confidential nature, integrity and assignment of data insofar as it relates to the scheme under administration. The data shall be kept and disclosed as per industry norms and standards and as may be required from time to time.

The following serve as a guide of the data to be maintained:

a)Employers (Including subsidiary/associated entities)

Full details of each employer participating in the scheme including the following:

  • Employer Group Codes.
  • Full name of the employer.
  • Address details - both physical and postal.
  • Names and contact details of relevant contact people within the employer.
  • Employer to be coded and provision to be made for subsidiary codes within each employer group to cater for branches, subsidiaries, continuation members, etc.
  • Date of admission and, where applicable, date of exit from the scheme, of the Employer or any of its subsidiaries or sub groups.

b)Members

  • Medical scheme membership number as well as the identity numbers of the principal member and each registered dependant.
  • Full name, initials and surname of the principal member and each registered dependant (Note: Each member and dependant to be coded in such a manner as to permit the tracking of claims per beneficiary).
  • Date of birth of each member and dependant.
  • Gender of each member and dependant.
  • Relationship of dependant to member, e.g. spouse, child, aged parent, etc.
  • Date of admission to scheme in respect of each member and dependant.
  • Date of exit from scheme, where applicable, in respect of each member and dependant.
  • Details of the benefit option in which each member and his/her dependants participate in.
  • Details of salary or income bands for contribution calculation purposes, where applicable.
  • Monthly contributions payable in respect of the member family.
  • Member’s physical address (domicilium citandi), postal address and contact details.
  • Details of any waiting periods imposed on entry to the scheme.
  • Details of any special transactions on behalf of the member or dependant, e.g. confirmation of hospital admissions, records of correspondence and telephonic enquiries, queries, etc.
  • Details of prior scheme membership, late joiner status and late joiner penalties imposed.
  • Each beneficiary’s REF number.
  • Detailed audit trail of all changes to member records.

c)Claims

The following itemised claims data (where applicable) should be maintained on the administration system for each beneficiary:

  • Each claim should reflect the date of receipt and should have a unique reference number which is entered on the system.
  • Each claim in the system must include the membership number and dependant identification.
  • Receipt date, processing date and date of payment for each claim.
  • Date of service.
  • Diagnostic, procedural, pharmaceutical classification system or other generic codes per line item.
  • Provider’s name and practice number.
  • Amount charged by provider for each line item, the tariff amount applicable and benefit awarded.
  • Indication whether a benefit has been paid directly to the provider or to the member. Where direct payment has been made in excess of the benefits allowed, amounts owing by the member must be calculated and reflected.
  • Where a benefit has been modified, for example, by imposition of a maximum, a levy or a limit, or if a benefit has been disallowed, an explanation by way of code or other means should be reflected on the claims record.
  • Where a claim has been adjusted after assessment or payment, full details of the adjustment must be shown. Where the adjustment results in a debt due by the member, details of the amounts owing must be calculated and reflected.
  • Identify Prescribed Minimum Benefits (PMB’s).
  • Identify third party claims, e.g. Road Accident Fund claims.
  • Total of claims allocated to savings accounts.
  • Total of claims allocated to the benefit limits.
  • Details, including practice code number, of referring / attending practitioner.

d)General

The data described above must be maintained on an integrated administration system so as to inter alia provide:

  • Membership cards.
  • Payments towards prescribed minimum benefits.
  • Contribution schedules and control over collections, including reconciliations.
  • Debtors schedules, and complying with measures introduced to control collections and reconciliations.
  • Timeous settlement of all claims.
  • Claims advices to providers and members.
  • Information to deal with member and provider enquiries.
  • Income tax information for members.
  • Financial reporting.
  • Statutory data for returns to the Registrar of Medical Schemes.
  • Analysis and reporting – Demographic, by member, by employer, by provider, by age of member or dependant, by tariff or category of benefit, REF requirements, etc.
  • Administrator performance - monitor in accordance with the detailed service level agreements.
  • Preparation of budgets and benefit design.
  • Provision of year-end audited annual financial statements.
  • Detailed audit trails of all changes made on / to the system.
  • Claims validation to, for example detect and prevent processing of duplicate payments, and general compliance with the rules of the scheme.
  • Analysis and reports by date of service as well as date of payment.
  • Analysis and reports of costs per member per month by date of service as well as date of payment.
  • Accurate analysis and reports of the number of members and dependants participating in the scheme each month. In this regard the system must allow these figures to be updated where arrear adjustments are made.
  • Analysis and reports showing key indicators such as the number of admissions to hospital per thousand beneficiaries, number of consultations by general practitioners and specialists per thousand beneficiaries, the incidence of caesarean sections per scheme population covered and the like. All reports must be capable of drilling down to different levels for example, by employer group, by paypoint, by provider, etc.
  • Analysis and reports of all member, provider and other enquiries received and addressed by the administrator on behalf of the scheme.
  1. THE ACCREDITATION OF THIRD PARTY ADMINISTRATORS
  1. The accreditation process
  1. First-time applications and evaluations
  1. The applicant completes the third party administrator accreditation application, which can be found on the Council’s website under “Application Forms” of “Administrators” and submit it with all the required information and prescribed fees to this Office.
  2. The senior accreditation analysts perform a desk-based analysis on the completeness and validity of the application form and information submitted.
  3. Once finalised and the application confirmed valid and complete, the analysts will make arrangements with the applicant and schedule a set-up meeting with senior management and other relevant staff members of the administrators to hand out the self-evaluation questionnaire and to explain the evaluation process.
  4. The administrator is then required to complete the self-evaluation questionnaire and to cross-reference the sections to the evidence supporting compliance within a period of approximately three weeks.
  5. The analysts will thereafter conduct the on-site evaluation and assess the applicant’s compliance with the standards by physically testing and verifying the compliance ratings as provided by the administrator on the self-evaluation questionnaire. Testing typically entails a review of the operating and financial reporting processes and assessing the functionality of the administration system.
  6. The analysts prepare an evaluation findings report and discuss it with senior management at the conclusion of the on-site evaluation. A copy of this report is then provided to the administrator to formally comment on the findings and recommendations within 30 days.
  7. The findings report, including the administrator’s comments is then discussed and finalised through an internal steering committee process.
  8. The final report is then presented to the Council for approval of accreditation.
  9. Once the Council has granted accreditation, such accreditation is valid for a period of two years from the date of the Council decision, subject to any accreditation conditions imposed by the Council. The administrator is issued with an accreditation certificate specifying the accreditation period and the conditions attached thereto. Typically, critical conditions have to be resolvedwithin a short period of time, whilst an administrator may be given up to six months to comply with the more general conditions.
  10. The Accreditation Unit evaluates compliance with the accreditation conditions after the expiry of the specified period and amends the accreditation certificate accordingly (with the approval of the Registrar).
  11. The conditions compliance assessment might include a follow up on-site visit to the administrator where required, or a desk-based analysis of the information provided, or a combination thereof.
  1. Renewal applications and evaluations
  1. The applicant completes the third party administrator accreditation and renewal application, which can be found on the Council website under “Application Forms” or “Administrators” and submit it with all the required information and prescribed fees to the Office at least three months prior to the accreditation expiry date. The renewal part of the application form requests specific information on significant changes in the administrator’s operating environment which could have an impact on its accreditation status, e.g. a change in shareholding, change in the administration or financial systems, etc.
  2. The senior accreditation analysts perform a desk-based analysis on the completeness and validity of the renewal application form and information submitted. Particular attention is paid to the applicant’s compliance with conditions previously imposed.
  3. Depending on the level and significance of changes reported, a follow-up on-site evaluation might be required to assess the administrator’s continued compliance with the accreditation standards subsequent to the changes having taken place.
  4. Where a follow-up evaluation is considered appropriate, a similar process as described in steps 3 to 7 of the “First Time Applications” process above will be followed.
  5. The evaluation findings report and the administrator’s comments on the findings (where applicable), is then discussed and finalised at internal steering committee level.
  6. The final renewal evaluation report is then presented to the Council for approval of renewal of accreditation.
  7. Once the Council has granted renewal of accreditation, such accreditation is again valid for a period of two years, subject to any conditions imposed by the Council. The administrator isissued with an accreditation certificate specifying the accreditation period and the conditions attached thereto. Typically, critical conditions have to be resolved within a short period of time, say 30 days, whilst an administrator may be given up to six months to comply with the more general conditions.
  8. The Accreditation Unit evaluates compliance with the accreditation conditions after the expiry of the specified period and amends the accreditation certificate accordingly (with the approval of the Registrar).
  1. ADMINISTRATION REQUIREMENTS
  1. Third party administrators - Domicilium & compliance measurement
  1. The principal place of business of the administrator must be in South Africa.
  2. The entity must conduct the business of bona fide administration of medical schemes and not as an agent or intermediary.
  3. It must have the required skills and infrastructure to deal with the complexity and number of schemes under administration.
  4. It must comply with the provisions of the Medical Schemes Act and the Regulations published thereunder.
  5. Evaluation of an applicant required to be accredited is done by means of an assessment of the application, the fitness and propriety of the applicant, evaluation of the administration contracts in place, a self assessment by the applicant in terms of the criteria and an on-site assessment by the Council for Medical Schemes of the extent of compliance with the accreditation standards and criteria.
  6. To the extent that administration functions are performed as contemplated in the first column of Annexure B (Service levels for compliance by administrators), the administrator must comply with the corresponding standards of delivery set out in that annexure.
  1. Sub-contracting of administration services by an accredited administrator
  1. The administrator must fully declare all sub-contracting arrangements between the organisation and other entities, and provide signed copies of the latest agreements to the Council for Medical Schemes.
  2. In order for the administrator to be able to sub-contract any of its administration functions, there must be a provision for such in the administration agreement between the scheme and the administrator. Note that the ultimate responsibility for the performance of administration functions vests with the administrator which contracts with the scheme concerned. Accordingly, the administrator is liable towards the scheme being administered for the actions of the sub-contractor. Subcontracting in this particular context does not envisage a scenario where functions are split between two or more administrators.
  3. Payment for services forming part of specified functions sub-contracted to another party by the administrator, must form part of the agreed administration fee paid by the medical scheme concerned to the administrator. No additional fee should be charged to the scheme.
  1. Third party administration agreements

Note: